Procedure for Appointment of Existing Director as Managing Director or Whole-time Director

Aakanksha Singhal

Aakanksha Singhal

Published on: Aug 14, 2020

Khushboo Sharma

Updated on: Sep 30, 2023

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Introduction

Every Listed Company and every other Public Company having a paid-up share capital of ten crore rupees or more shall have whole-time key managerial personnel. [Rule 8 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014]

Key Managerial Personnel in relation to a Company means:

• Chief Executive Officer or the Managing Director or the Manager
• The Company Secretary
• The Whole-time Director
• The Chief Financial Officer
• Such other officer, not more than one level below the directors who is in whole-time employment, designated as Key Managerial Personnel by the Board
• Such other officer as may be prescribed.

Mandatory Requirements

• No company shall appoint or employ at the same time a Managing Director and a Manager.
• No company shall appoint or re-appoint any person as its Managing Director or Whole-time Director for a term exceeding five years at a time.
• No re-appointment shall be made earlier than one year before the expiry of his term.
• No company shall appoint or continue the employment of any person as Managing Director or Whole-time Director who
  • is below the age of twenty-one years or has attained the age of seventy years
  • is an undischarged insolvent or has at any time been adjudged as an insolvent
  • has at any time suspended payment to his creditors or makes, or has at any time made, a composition with them
  • has at any time been convicted by a court of an offence and sentenced for a period of more than six months.
• A Managing Director or Whole-time Director shall not hold office in more than one company except in its subsidiary company at the same time. If he is holding office in more than one company at the same time on the date of commencement of this Act, shall, within a period of six months from such commencement, choose one company, in which he wishes to continue to hold the office.
• Company shall pass a Special Resolution for the appointment of Managing Director or Whole-time Director under the following situations only
  • If the person so appointed has attained the age of 70 years.
  • If the remuneration payable exceeds the prescribed limit.
• Approval of Central Government shall be required where:
  • Appointment of MANAGING DIRECTOR or WHOLE TIME DIRECTOR is at variance to the conditions specified in Part I of Schedule V.
  • No Special Resolution is passed for the appointment of a person as MANAGING DIRECTOR or WHOLE TIME DIRECTOR who has attained the age of 70 years.

Following Procedure is to be followed [Section 196 and 203]

1. Meeting of Nomination and Remuneration Committee
   Where a Company is required to constitute a Nomination and Remuneration Committee under section 178, shall receive a recommendation from the committee for the appointment and remuneration of the MANAGING DIRECTOR or WHOLE TIME DIRECTOR. [For convening meeting of Nomination and Remuneration Committee, Refer the Procedure for Conducting Nomination and Remuneration Committee Meeting].
2. Convene a Meeting of Board of Directors [As per Section 173 & Secretarial Standard-1 (SS-1)]
   • Issue Notice of Board Meeting to all the Directors of Company at their addresses registered with the Company, at least 7 days before the date of Board Meeting. A shorter notice can be issued in case of urgent business.
   • Attach Agenda, Notes to Agenda and Draft Resolution with the Notice. Notice shall include the terms and conditions for such appointment and remuneration payable to the MANAGING DIRECTOR or WHOLE TIME DIRECTOR.
   • Hold a meeting of Board of Directors and pass a Board Resolution
     • to appoint the existing Director as MANAGING DIRECTOR or WHOLE TIME DIRECTOR and fix terms and conditions of such appointment subject to approval of members of the Company in next General Meeting.
     • to fix the day, date, time and venue of the General Meeting and to approve the draft notice convening the General Meeting along with explanatory statement annexed to the notice as per requirement of the Section 102 of the Companies Act, 2013.
     • to authorize the Director or Company Secretary to sign and issue notice of General Meeting.
     • to delegate authority to Company Secretary or any one director of the company to sign, certify and file the required form with Registrar of Companies and to do all such acts and deeds as may be necessary to give effect to the Board’s decision.
   • Issue an appointment letter to the MANAGING DIRECTOR or WHOLE TIME DIRECTOR.
   • Listed Company shall submit the disclosure of such appointment to the Stock Exchange as soon as reasonably possible and but not later than the following:
     • thirty minutes from the closure of the meeting of the board of directors in which the decision pertaining to the event or information has been taken
     • twelve hours from the occurrence of the event or information, in case the event or information is emanating from within the listed entity
     • twenty four hours from the occurrence of the event or information, in case the event or information is not emanating from within the listed entity, from the end of the Board Meeting and update the same on the website of the company within 2 working days. [Regulation 30 & 46(3) of the SEBI (LODR) Regulations, 2015]
   • Prepare and Circulate Draft Minutes within 15 days from the conclusion of the Board Meeting, by Hand/Speed Post/Registered Post/Courier/E-mail to all the Directors for their comments. [Refer the Procedure for Preparation and Signing of Minutes of Board Meeting]
3. File Form MGT-14 with ROC
   Company shall file a copy of Board Resolution with the ROC in form MGT-14 within 30 days of passing of such resolution.
4. Making Necessary entries in Register of Directors
   Company shall make necessary entries in the Register of Director and Key Managerial Personals.
5. Convene General Meeting [Section 96, 100 and Secretarial Standard-2 (SS-2)]
   • Notice of General Meeting shall be given at least clear 21 days before the actual date of a General Meeting in writing, by hand or by ordinary post or by speed post or by registered post or by courier or by facsimile or by e-mail or by any other electronic means or a Shorter Notice can be issued with the consent of at least majority in number and ninety five percent of such part of the paid up share capital of the company giving a right to vote at such a meeting in accordance with Section 101.
   • Notice will be sent to all the Directors, Members, Auditors of Company, Secretarial Auditor, Debenture Trustees and to others who are entitled to receive the notice of the General Meeting.
   • Notice shall specify the day, date, time and full address of the venue of the Meeting and contain a statement on the business to be transacted at the Meeting.
   • Hold the General Meeting on fixed day and pass an Ordinary Resolution/Special Resolution as the case may be for appointment of MANAGING DIRECTOR or WHOLE TIME DIRECTOR and payment of his/her remuneration.
   • Issue letter of appointment to the MANAGING DIRECTOR or WHOLE TIME DIRECTOR of the Company mentioning terms and conditions of appointment and remuneration to be payable to them.
   • Listed Companies shall disclose the proceedings of General Meeting to the Stock Exchange within 24 hours from the conclusion of General Meeting and same shall be posted on the website of the company within 2 working days. [Regulation 30 and 46(3) of the SEBI (LODR) Regulations, 2015]
   • Listed Companies shall submit to the stock exchange the details of the voting results within two working days from the conclusion of the meeting and post the same on the website of the Company. [Regulation 44 of the SEBI (LODR) Regulations, 2015]
   • Prepare the minutes of General Meeting, get them signed and compile accordingly. [Refer the Procedure for Preparation and Signing of Minutes of General Meeting].
6. Filing of Form MGT-14 with ROC [Section 117]
   File Form MGT-14 with the Registrar of Companies within 30 days of passing the Special resolution in the General Meeting, , along with following documents as an attachment
   • Certified True Copies of the Ordinary Resolution (For Listed and Public Unlisted Companies)/Special Resolution along with explanatory statement.
   • Copy of the Notice of meeting sent to members along with all the annexure.
   • Shorter Notice Consent, if any.
7. File Form DIR-12 with ROC
   Company shall file the particulars of appointment of MANAGING DIRECTOR or WHOLE TIME DIRECTOR to ROC in Form DIR-12 within 30 days of such appointment along with the following documents:
   • Certified True Copies of the Special Resolutions along with explanatory statement.
   • Copy of the Notice of meeting sent to members along with all the annexure.
   • Letter of Appointment.
   • Details of Interest in any other entity.
   • Any other relevant document.
8. File Form MR-1 with ROC
   Company shall file the return of appointment of MANAGING DIRECTOR or WHOLE TIME DIRECTOR in Form MR-1 with ROC within 60 days of such appointment along with the following documents
   • Certified True Copies of the Special Resolutions along with explanatory statement.
   • Copy of the Notice of meeting sent to members along with all the annexure.